Describing the revised peak funding estimate for the National Broadband Network as a "blowout" robs the discussion of nuance, according to communications minister Senator Mitch Fifield.
“Headline grabbing terms like blowout take little account of the projections and operating parameters that underpin peak funding estimates,” Fifield today told an NBN forum held by Communications Alliance and CommsDay.
NBN in August released an updated corporate plan that confirmed the National Broadband Network is likely to cost more than the estimate in a strategic review into the network commissioned by the Coalition government shortly after its 2013 election victory.
The strategic review concluded that a 'multi-technology mix' (MTM) network could be rolled out by 2020 with peak funding estimated at $41 billion.
Following the review the Coalition government formally scrapped an all-fibre rollout and shifted to the MTM model, under which the majority of fixed line connections will be fibre-to-the-node (FTTN), fibre-to-the-building (FTTB) and hyrbid fibre-coaxial (HFC).
NBN's corporate plan pegged peak funding at $46-$56 billion, with the company's management aiming for $49 billion with a $4.6 billion contingency.
“Given what we know today, this is the most credible assessment of the expected cost of a very complex infrastructure build and simply reflects the great many unknowns that remain,” Fifield said today.
“Clinging to what might have been in some parallel past takes no account of the billions already spent on the NBN and indeed of the revenue foregone given the underperformance of the early years,” the minister said.
“One thing is abundantly clear, however: Any reduction in operating costs claimed for an all-fibre network would be minuscule when compared to just the interest payments on the extra investment required for such construction.”
At the request of the government, for the corporate plan NBN prepared a high-level desktop analysis of switching back from the 'MTM' network to an all-fibre build.
"Management estimates that an all-FTTP fixed line rollout could be completed by 2026 but possibly as late as 2028, with a peak funding range of $74-84 billion (vs. $46-56 billion for MTM) depending on critical sensitivities around peak construction rates, construction and operating cost, and revenue generation," the corporate plan said.
"First positive free cash flow is estimated to be achieved between FY26 and FY31 for an all-FTTP fixed line rollout (vs. FY22 for MTM)," the document said.
"Not only would the company be saddled with negative cash flows out to the horizon, but construction phase would not end until 2026 and potentially as late as 2028," Fifield said.
"In such a rapidly evolving sector it's hard to imagine what user demand might look like at more than a decade from now."
"Even critics acknowledge that the multi technology mix will see fast broadband reach communities sooner and at less cost than the alternatives previously considered," the minister said in his address.